PM Narendra Modi makes exception to allow Japanese bank expansion

Written by Arun S | New Delhi | Updated: Aug 28 2014, 06:40am hrs
Ahead of Prime Minister Narendra Modis proposed visit to Japan this month end, New Delhi, in a goodwill gesture to the island nation that is emerging as major economic partner for India, allowed Japans Mizuho Bank to open its fifth branch in Ahmedabad.

Sources said the Centres move is despite the policy pursued by the commerce ministry as per which expansion of foreign banks in India is contingent on reciprocal benefits accorded to Indian banks in the respective countries.

An inter-departmental committee, consisting of officials from the ministries of

finance, home, commerce

and external affairs, recently cleared the long-pending Mizuho proposal, sources said.

The RBI usually forwards to the committee the applications of foreign banks for branch expansion for opinion, and then it takes a final decision on the basis of the panels recommendations.

The panel had earlier deferred Mizuhos proposal to start two more branches in India in addition to its existing four branches in the country (in Delhi, Mumbai, Bangalore and Chennai). Bank of Tokyo-Mitsubishi UFJ has four, while Sumitomo Mitsui Banking has one branch in India , taking the total to nine. However, as on September end 2013, Indian banks only have four branches in Japan with SBI and Bank of India having two branches each.

Modi is understood to have suggested that the move must be seen in the larger context of strengthening economic ties with Tokyo and attracting Japanese investments in the country, especially in mega projects such as the Delhi Mumbai Industrial Corridor. Sources said even when he was the Gujarat Chief Minister, Modi had supported Mizuhos expansion plans in India along with similar plans of many Japanese companies as he has a special rapport with that country.